US stocks mixed as markets question economic data

COLD SNAP:Investors shrugged off lackluster economic reports, as many believe the data have been distorted by a run of cold weather that depressed economic activity

AFP, NEW YORK

US stocks were mixed this week as investors grappled with a batch of mostly disappointing economic data that has been seen as compromised by weather.

After stocks posted strong gains last week, two of the three indices finished modestly lower.

The Dow Jones Industrial Average fell 51.09 (0.32 percent) over the holiday-shortened week to 16,103.30, while the S&P 500 slipped 2.38 (0.13 percent) to 1,836.25. The tech-rich NASDAQ Composite Index rose 19.38 (0.46 percent) to finish the week at 4,263.41.

The week was fairly light on economic data, with markets closed on Monday for a public holiday. Highlights included a drop in last month’s existing-home sales and a steep decline in the National Association of Home Builders index of homebuilder sentiment.

Yet markets essentially shrugged off the reports, as was the case with disappointing reports on US jobs growth and retail sales released earlier in the month.

Investors believe the data have been distorted by a run of cold weather that has depressed economic activity in much of the country.

“On balance the economic data are weaker than expected,” Hinsdale Associates director of investment Bill Lynch said. “Because of the extreme weather across the country, [investors] are willing to give the economic data a pass, at least for now.”

Christopher Low, chief economist at FTN Financial, said the market was moving “tentatively” in light of the reservations about data.

“There is a growing sense that we’re likely to have three months of unreliable data,” Low said. “We really don’t know what the background economic picture is.”

On Wednesday, minutes from the US Federal Reserve’s monetary policy meeting last month sent shares lower.

The minutes showed a larger number of policymakers sought an early hike in the Fed’s benchmark interest rate amid growing confidence in the US economy. Still, the minutes made clear that a majority continued to favor ultra-low interest rates through next year.

A note from Nomura characterized the Fed minutes as a “nonevent.” Stocks did not see significant movement on Thursday or Friday.

Major corporate news included Facebook’s surprise announcement that it would buy messaging service WhatsApp in a US$19 billion cash-and-stock deal.

The deal marries Facebook, the world’s biggest social network with more than 1.2 billion members, with WhatsApp, which has 450 million users.

Analysts generally praised the acquisition as a savvy way for Facebook to lock up the free messaging market, even if the price tag is steep.

The week’s other big deal was the US$25 billion acquisition of US pharmaceutical company Forest Laboratories by Actavis, a US drugs firm based in Dublin.

The deal constituted a major payday for activist Carl Icahn, the second-biggest shareholder in Forest, who had long challenged Forest’s leaders.

In earnings news, Wal-Mart Stores reported a hefty drop in quarterly profits following a weak holiday shopping season in the US. The world’s biggest retailer also unveiled major new investments in smaller stores and online shopping as it seeks to boost US sales following a run of disappointing results.

PepsiCo returned to the headlines after activist investor Nelson Peltz reportedly delivered a letter to the company’s board calling for it to separate the company’s global snacks and beverages businesses to increase shareholder value.